Alternative methods of joint cost allocation, product-mix decision. The Northwest 1.a .J ointc osts allocated Forestry Products Company processes lumber products for sale to lumber wholesalers. Its to white, $144,000 most popular line is oak products. Oak tree growers sell Northwest Forestry whole trees.

These trees are jointly processed up to the splitoff point at which raw select oak, raw white oak, and raw knotty oak become separable products. Each of these raw products is then separately further processed by Northwest Forestry into finished products (select oak, white oak, and knotty oak) that are sold to lumber wholesalers. Data for August 2010 are

a. Joint processing costs (including cost of oak trees) $360,000

b. Separable product at splitoff point

There is an active market for raw oak products. Selling prices available in August 2010 were raw select oak ($9.60 per board foot), raw white oak ($4.80 per board foot), and raw knotty oak ($3.60 per board foot).
774 | carter 1s There were no beginning or ending inventories for August 2010.

REQUIRED 1. Allocate the joint costs to the three products using the

a. sales value at splitoff method.

b. physical-measure method.

c. estimated net realizable value method.
2. Assume that not all final product produced in August 2010 was sold. Ending inventory for August 2010 was select oak (1,000 board feet), white oak (2,000 board feet), and knotty oak (500 board feet). What would be the ending inventory values in the August 31 balance sheet under each product for each of the three methods in requirement 1?
3. Is Northwest Forestry maximizing its total August 2010 operating income by fully processing each raw oak product into its finished product form? Show computations.LO1

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Raw select oak 30,000 board feet Raw white oak 50,000 board feet Raw knotty oak 20,000 board feet c. Final product produced and sold Select oak White oak Knotty oak 25,000 board feet at $19.20 per board foot 40,000 board feet at $10.80 per board foot 15,000 board feet at $8.40 per board foot d. Separable processing costs $72,000 For select oak For white oak $108,000 For knotty oak $18,000